(Repeat for additional subscribers)
May 19 (The following statement was released by the rating agency)
The first U.S. CMBS 2.0 loan defaults have surfaced,
though they were driven by idiosyncratic events and do not appear to be the
start of prolonged rising defaults, according to Fitch Ratings in a new report.
Nine loans totaling $74.9 million defaulted last year on CMBS deals issued
between 2010 and 2013. Eight of the defaults were on loans for multifamily
properties. Causes were largely due to tenant bankruptcies and financially
challenged sponsors, according to U.S. CMBS Director Brook Sutherland.
'The largest CMBS 2.0 default occurred when a major office tenant vacated before
their lease expired,' said Sutherland. 'The multifamily CMBS defaults were
mostly on smaller properties that, despite adequate property performance, were
chronically late with payments possibly because of organizational problems at
the sponsor level.'
Fitch identified an additional 12 CMBS loans totaling $157.5 million
transferring to special servicing but averting default.
Despite these outliers, the rate of CMBS 2.0 defaults should remain low. Whereas
the average annual default rate for CMBS 1.0 (excluding 2005-2007 deals) is
roughly 0.7%, the CMBS 2.0 default rate comes in at less than 0.02%. That number
stands to slowly increase with higher leverage and more aggressive underwriting
taking hold in recent months. A bigger concern over time, however, will be
balloon risk. 'If interest rates are substantially higher when the CMBS loan
matures, refinancing is likely to be more difficult unless there is some
appreciation in cash flow,' said Sutherland.
'First Defaults Appear for Recent Vintage CMBS' is available at
'www.fitchratings.com' or by clicking on the below link.
Link to Fitch Ratings' Report: First Defaults Appear for Recent Vintage CMBS
(Default Rate Remains Low)